SAFEs (Simple Agreements for Future Equity) have become one of the most popular early-stage fundraising tools for startups in Miami and beyond. They’re fast, flexible, and require fewer upfront negotiations than a priced equity round.
But before accepting capital through a SAFE, founders need to understand how the two major types—pre-money and post-money SAFEs—impact investor ownership, valuation, and dilution. The differences are subtle, but they can significantly affect your cap table.
At Recalde Law Firm, P.A., we help founders raise capital with eyes wide open—so here’s what you need to know.
What Is a SAFE?
A SAFE is an agreement that allows an investor to put money into your startup now in exchange for the right to receive equity later, usually at a discount or capped valuation when a future priced equity round occurs.
There are two primary forms:
• Pre-Money SAFEs – calculate investor ownership based on the company’s valuation before new money is added.
• Post-Money SAFEs – calculate investor ownership based on the company’s valuation after the SAFE has already been added in.
Pre-Money SAFEs: Founder-Friendly, But Unpredictable
With a pre-money SAFE, the investor’s equity conversion is based on the company’s valuation before the next funding round happens. That sounds good for founders—because it doesn’t take into account the dilution caused by other SAFEs or new investors. But here’s the catch:
• If you issue multiple pre-money SAFEs, they all dilute the future pool of equity—but none of them account for each other when calculating ownership.
• As a result, founders and investors can underestimate how much equity has been promised until the next round arrives. This leads to “dilution shock” for both sides.
Example:
You raise $500K in pre-money SAFEs with a $5M valuation cap. Later, you raise a Series A at a $10M valuation.
The SAFE converts at the $5M cap—but since none of the SAFEs accounted for each other, they could convert into a larger total percentage of equity than expected.
Post-Money SAFEs: Transparent, But Can Dilute More
With a post-money SAFE, the investor’s equity percentage is locked in based on the post-money valuation, including all SAFEs. This gives investors more clarity and control—they know exactly what percentage they’re buying.
• Post-money SAFEs calculate ownership based on a cap that includes the SAFE itself.
• This means each SAFE investor gets the exact ownership percentage they bargained for—but it also means founders absorb the dilution upfront.
Example:
An investor puts in $250K at a $5M post-money valuation cap.
That investor is purchasing exactly 5% of the company.
Unlike the pre-money SAFE, other SAFEs and new funding don’t change that 5% ownership—they dilute the founder instead.
The Role of Valuation Caps
Most SAFEs include a valuation cap—a ceiling on the company’s value for the purpose of calculating how much equity the investor receives.
• A lower cap gives the investor more equity when the SAFE converts.
• Caps don’t set the company’s actual valuation, but they influence the price per share the SAFE investor will pay.
Key Point:
In both pre-money and post-money SAFEs, the cap is a negotiation point. But in post-money SAFEs, the cap has a more direct and predictable relationship to how much of your company you’re selling.
Which Is Better?
• Pre-Money SAFEs are often better for founders in the short term—ifthey’re raising from a small number of early believers and need flexibility.
• Post-Money SAFEs are better when raising from professional investors who want clarity—and when founders want a clearer picture of their dilution.
There’s no one-size-fits-all answer, but there is one universal truth: You need to understand what you’re giving up before taking money.
Structure Still Matters
SAFEs are often described as “simple,” but they still require legal and structural discipline. For a SAFE round to function properly, your company should be:
• Properly formed as a corporation (often a Delaware C-Corp, which is the standard in venture capital-backed deals)
• Able to track equity ownership and convert SAFEs properly
• Equipped with founder agreements, board approvals, and basic corporate governance
• Ready to present a clear and clean cap table before the next round
Supporting Miami Startups with Capital Strategy
At Recalde Law Firm, P.A., we work with Miami-based startups raising capital through SAFEs, convertible notes, and priced rounds. Whether you’re just getting started or preparing for a Series A, we help founders:
• Understand their fundraising instruments
• Negotiate caps, discounts, and conversion terms
• Track ownership and protect founder equity
• Build the legal foundation to scale
Recalde Law Firm, P.A.
Miami, FL 33131
Phone: (305) 792-9100
Email: [email protected]
We help Miami startups raise capital with structure, clarity, and long-term vision.
